The Statutory Right to Cool Off

Section 5 of the Land and Business (Sale and Conveyancing) Act 1994 (SA) gives a purchaser of land in South Australia the right to rescind the contract by giving the vendor written notice before the cooling-off period ends. The right covers most home purchases, but it is not limited to residential property: it applies to contracts for the sale of land generally, subject to the exceptions set out below.

The right is one-sided. The vendor is bound from the moment the contract is signed and has no cooling-off right of their own. The purchaser can withdraw until the period ends, and if no notice is given in time, the purchaser is bound in the same way as the vendor.

When the Cooling-Off Period Starts

The period is two clear business days, and it runs from the later of two events: the making of the contract, and service on the purchaser of the vendor's statement — the Form 1.

  • If the Form 1 was served on you before the contract was made, your cooling-off notice must be given before the end of the second clear business day after the day the contract was made.
  • If the Form 1 is served on you after the contract is made, the period runs to the end of the second clear business day from the day the Form 1 is served.

"Clear" means the day of signing or service is not counted, and Saturdays, Sundays and public holidays are not business days. If you already hold the Form 1 and sign on a Friday, the period ends at the end of the following Tuesday, assuming Monday is not a public holiday. If you sign on Friday but the Form 1 is not served until the following Wednesday, the period runs from the Wednesday instead and ends at the end of that Friday.

The right ends at settlement if settlement happens first. And if the Form 1 is not served at least two clear business days before settlement, the prescribed Form 1 itself tells the purchaser that the cooling-off notice may be given at any time before settlement.

How to Give a Cooling-Off Notice

The notice must be in writing and signed by the purchaser. Section 5(2) of the Act sets out how it may be given:

  • to the vendor personally;
  • by registered post to the vendor's last known address, in which case it is taken to be given when it is posted;
  • by fax or email to a number or address the vendor has provided for that purpose, in which case it is taken to be given when it is sent; or
  • where an agent is authorised to act for the vendor, by leaving it with a person apparently responsible to the agent at the agent's address for service, or by registered post to that address.

If there is ever a dispute, the purchaser has to prove that the notice was given in time. Keep a written acknowledgment if you hand the notice to the agent's office, and keep the transmission record if you send it by email.

What It Costs to Cool Off

A purchaser who cools off is entitled to the return of money paid under the contract. The vendor may keep only two things: any amount paid for an option to purchase, and a deposit, but only if that deposit is no more than $100. South Australia has no percentage-of-price cooling-off fee.

The Act also limits what can be collected before the period ends. Before then, a vendor or stakeholder must not demand any money from the purchaser other than an option fee or a holding deposit of up to $100. The main deposit is paid once the cooling-off period has expired.

When There Is No Cooling-Off Right

Section 5(7) of the Act lists the situations in which the cooling-off right does not apply to a sale of land:

  • the sale is by auction;
  • the property was offered at auction but passed in, and a person who bid at the auction (or on whose behalf a bid was made) signs the contract on the same day as the auction;
  • the purchaser received independent advice from a legal practitioner before entering into the contract, and the legal practitioner signed the prescribed certificate (the waiver discussed below);
  • the purchaser is a body corporate and the land is not residential land, so a company buying a house keeps the right;
  • the sale is by tender and the contract is made at least five clear business days after tenders close and at least two clear business days after the Form 1 is served;
  • the contract is made by exercising an option to purchase at least five clear business days after the option was granted and at least two clear business days after the Form 1 is served; or
  • the contract also includes the sale of a business that is not a small business.

Buying a small business is subject to a different, five-business-day regime — see our guide to buying a small business in South Australia.

Waiving the Cooling-Off Right

The Act provides one mechanism for a purchaser to give up the right in advance: before entering into the contract, the purchaser receives independent advice from a legal practitioner, and the legal practitioner signs a certificate in the form approved by the regulations. The certificate must come from a legal practitioner — a registered conveyancer cannot give it.

Purchasers sometimes do this in a competitive market, where a vendor will prefer an offer that comes without a cooling-off window. It is a genuine surrender of a statutory protection, so the review of the contract and the Form 1 should happen before the certificate is signed, not after.

Cooling Off Is Not the Same as a Contract Condition

Cooling off is a statutory right that exists whether or not the contract mentions it. It is different from a "subject to finance" or building-inspection condition, which is a term of the contract with its own deadline and its own notice requirements. A purchaser who is relying on a finance or inspection condition needs to manage those dates separately; letting the cooling-off period pass does not extend them, and they do not extend cooling off.

Practical Advice for Purchasers

Two clear business days is very little time to have a contract reviewed, arrange a building inspection or make enquiries about title. We strongly recommend engaging a lawyer or conveyancer before you sign any contract, not after. If you have signed and want to cool off, contact your lawyer immediately so the notice is correctly prepared, signed and served in time. Losing the right through a procedural error, or a misunderstanding about when the period started, can be expensive.

Sources

This article is general information about South Australian law as at the date it was last updated. It is not legal advice about your circumstances.